12
Apr
By support
Home Mortgage Tips

Key Questions to Ask Yourself Before Deciding to Refinance Your Mortgage

Key Questions to Ask Yourself Before Deciding to Refinance Your MortgageIf you’re looking to reduce your interest payments or get more favorable loan terms, there are lots of ways you can change your mortgage. But one of the most effective ways to take advantage of low interest rates is with a mortgage refinance. That said, refinancing typically comes with a variety of costs and may not be a good solution or all homeowners.

So how can you tell whether it’s a good idea to refinance your home? Here are three questions you need to ask yourself if you want to find out.

How Much Equity Do I Have?

If you have less than 20 percent equity in your home, your lender can require you to get private mortgage insurance. While refinancing could get you a lower interest rate and better terms, extra PMI costs will usually devour any savings you may have had. Before you decide to refinance your mortgage, determine how much equity you have in your home and how close you are to the 20 percent mark – if you can pay down enough of the balance to drop your PMI, refinancing may be a viable option.

How Long Do I Plan To Live Here?

When you refinance your home, you’ll pay administrative costs ranging from 3 to 6 percent of the loan’s value. You’ll need to do some calculations to determine your break-even point – the point in time when the money you save from a lower interest rate is equal to the amount of money you paid in administrative costs. If you’re close to paying off your entire mortgage or if you plan to move before you hit the break-even point, a refinance will only cost you money.

Is It A Good Time To Refinance?

Refinancing creates a new loan based on your home’s current value – and if your home has increased in value since you bought it, you can cash out your equity. However, refinancing may also lose you money. For example, if you have $300,000 worth of equity in a $750,000 home, refinancing allows you to cash out your $300,000.

But if your property value has decreased in recent years – for instance, if it’s dropped to $500,000 – then a refinance can change your equity status. Equity is your home’s current value minus your remaining loan balance. If you owe $450,000 and your property value drops to $500,000, then your equity is only $50,000 instead of the $300,000 you had before.

The key lesson? Always check market conditions before refinancing a home.

Refinancing is a complex issue with a variety of nuances. That’s why it pays to consult your local mortgage professional to learn whether a refinance is right for you.

05
Apr
By support
Home Mortgage Tips

Budgeting for a New Home?: 3 Unlikely Costs to Consider in Your Overall Budget

Budgeting for a New Home? 3 Unlikely Costs to Consider in Your Overall BudgetIf you’re planning to buy a new home in the near future, you’re probably working hard to prepare a budget and determine how much you can afford before you start viewing homes. While it’s good to have an idea of what you can pay for a new house, many buyers routinely miss several key home buying costs that can later cause a variety of problems. Before you start looking for your new home, make sure you add these three commonly forgotten costs to your budget.

Title Insurance: Critical Protection Against Title Claims

Title insurance is something that most buyers forget about until closing, but it’s a necessary form of protection for every soon-to-be homeowner. Title insurance provides you with protection against financial losses in the event that you later discover title defects. For example, title insurance can protect you from losses in situations where the seller doesn’t actually own the home, where there is a lien on the property, or where a previous owner accidentally omitted or deliberately falsified critical property records.

In a standard real estate contract the seller will pay for the buyer’s title insurance, but in most states, the buyer is also required to buy title insurance to protect the mortgage lender. Title insurance for lenders usually costs, on average, $2.50 per $1,000 of assessed property value.

Unexpected Renovations: Home Inspectors Aren’t Perfect

Typically, your home inspector will alert you to any issues requiring renovation or repair before you buy your new home. But if your home inspector is negligent and misses a critical problem with the home, you may need to find money for surprise renovations – and fast.

While you can file an insurance claim or sue the inspector for negligence in order to recoup damages, court cases and insurance claims take time – time that you may not have if you’re facing an urgent home problem. Most real estate agents suggest budgeting 1% of your home’s budget each year for maintenance costs.

Initial Interest: Your First Month Comes Due Before You Know It

Your mortgage starts accruing interest on the day you close the home sale, not on the day you move in. So in order to make sure that you have a consistent payment, the lender collects the first partial month of interest at the closing table.  It’s called “prepaid interest” and is included in your overall closing costs.  That means if you sign the contract on March 15, you’ll need to make an interest payment for the period of time lasting from March 15 to March 31 at closing. Your payment will then come due on May 1 – so be sure to include your first interest payment in planning for your closing costs.

Buying a home isn’t cheap. But when you clearly understand the various costs involved, it’s easier to plan your home purchase and budget for expenses, both expected and not. Contact your local mortgage professional to learn more about home buying costs.

31
Mar
By support
Home Mortgage Tips

Rookie Mistakes: Don’t Make These 4 First-Time Homebuyer Mistakes

Rookie Mistakes: Don't Make These 4 First-time Home-buyer MistakesBuying your first home is exciting. Many young people view homeownership as the definitive mark of adulthood, the final milestone on a decades-long journey. And while becoming a homeowner is cause for celebration, you’ll want to ensure you keep your enthusiasm in check just a little while longer.

Keep a level head and you’ll easily avoid these common mistakes first-time buyers make.

Don’t View Your Home As An Investment

First-time buyers commonly think that they can invest everything they’ve saved into a home, fix it up, and then sell it for a large profit in a few years. However, a home is a fixed asset that can be hard to sell off quickly. Economics professor Art Carden says “for people looking to start an investment, a stock or bond is a better option than a house, as I’ve never had to call a plumber because a mutual fund started leaking.”

Don’t Skip The Home Inspection

The American Society of Home Inspectors says 10 percent of home purchases happen without an inspection. Quite simply, buyers decide it’s better to save the fee for the down payment – but often, issues arise later that can result in multi-thousand-dollar repair bills. Foundation problems can be especially nasty, sometimes requiring a teardown.

Before signing a contract, make sure you have a licensed home inspector view the property.

Don’t Believe Everything You Read On The Internet

While it’s good to start researching neighborhoods, mortgage terms, and home valuations online, keep in mind that online estimates are just that – estimates. Not all mortgages are created equal, and the many differences between loans can result in significant changes in the overall cost. For example, just because a lender is giving you a mortgage without an origination fee, that doesn’t make it a good deal – you could be paying a lot more in interest rates.

Always make sure you thoroughly check and understand loan terms before signing anything.

Don’t Go For The Most Expensive House You Can Afford

When you qualify for a mortgage, your lender will tell you the maximum home purchase price they’ll fund, based on your annual income as well as your debt-to-income ratio. However, just because you can afford a $500,000 two-story townhouse, that doesn’t necessarily make it a good idea to buy said townhouse. You’ll want to give yourself a cushion in the event that you lose your job, have children, need to pay medical expenses, or go back to school.

First-time buyers often make a variety of mistakes when buying a home, but a mortgage advisor can help you to make the right decisions – decisions that set you on the best possible path toward homeownership. Contact your local mortgage professional today to learn more.